The demonetization in 2016 has had a huge impact on the countries economy. The GDP of the country experienced a drop to 6.1% as all the sectors were affected by the demonetization and the business of many came to a halt, especially the real estate business. With the GST rolling in from July 1, many businessman and real estate agents fear that their business would be more seriously affected than it was during the demonetization.
The Goods and Services Tax is by far the most revolutionary tax reform that Inia has seen in decades. Nirmal Singh 3C Company believes that the best thing about GST is that it would culminate the cascading tax structure which we have been following for a very long time. It is a huge step and is certainly going to have a profound effect on the countries economic situation. Removing all the indirect taxes and compiling them all under a single tax will increase the tax collections by making it easier for the retailers and businessman to moderate the tax levels. But the positive effect of the same can be seen only after 2-3 years since it would take a lot of time for the citizens to understand and adjust with the new tax.
The GST specification and guidelines are out but still there is a lot of confusion about what tax rate would be applicable for the real estate and the construction industry.
The real estate tax bracket are expected to be hopefully under 12% and the GST. When asked whether it would be a good time for the real estate market or nor Nirmal Singh 3C Company says that it cannot be decided solely by the GST rate as the dropping off of the sales tax and the input tax credit facilities for the developers would also play a significant role in the calculation of the same.
The current tax levels include 4.5% service tax plus 1% Value- added tax or VAT. A mentioned above, the GST rate for the projects under construction would be 12% and there would be an increase of 6.5% for the apartment purchasers. The main focus of the new tax rate is to insure that unlike before, the final consumer bears the overall tax.
GST is not applicable to ready-to-move-in properties. Which means, developers will have to bear the entire tax burden as it cannot be passed on to end consumers. This further implies that the prices of the ready-to-move-in apartments will rise in order to cut down the tax effect on the developer.
At the end of the day, the developers will have to rethink their entire approach towards their business. There has been a lot of forgery in the past years, the customers have been fooled, asked for higher prices or handled over illegal papers but the good news is that with RERA the consumer is more secure and all the dealings are safe.